The Amazon 2011 Annual Report – available on its website – makes for refreshing reading, unlike those of ‘normal’ companies and contains a wealth of potentially useful insight for NAMs and KAMs.
We have picked out sections worth particular study as follows, but urge you to browse for items of personal relevance.
Chairman’s Introduction shows a series of mini-case studies featuring satisfied users. “To us, the value of Amazon Web Services is undeniable – in twenty seconds, we can double our server capacity”, etc. etc.
Also features useful background on Kindle development.
As always Amazon reprints a copy of its 1997 letter to shareholders, pointing out that its ‘approach remains the same, and it’s still Day 1 (for the Internet)’! This includes the determination that ‘a fundamental measure of our success will be the shareholder value we create over the long term via our ability to extend and solidify our current market leadership position’.
‘We first measure ourselves in terms of the metrics most indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis, and the strength of our brand. We have invested and will continue to invest aggressively to expand and leverage our customer base, brand, and infrastructure as we move to establish an enduring franchise’.
P1 Index of the Annual Report.
P2 For details of Consumers, Sellers, Enterprises (Web Services), Creators and Competition.
P5-14 Risk analysis: 10 pages dealing with risk-management, including growth rate and operating results fluctuations, constraints on geographical expansion, need for optimisation of fulfilment centres (focus on service level).
P17 Selected consolidated financial data: Best to focus on consolidated financial statements (but note CAGR 26% for four years of global financial crisis).
P18 Management financial focus on long term, sustainable growth in free cash flow per share, including details. Reduction of our variable costs per unit and work to leverage our fixed costs. Because of our model we are able to turn our inventory quickly and have a cash-generating operating cycle.
P24 Geographical performance (US & International).
P26 Category split, geographically: Media, Electronics and other general merchandise, and ‘Other’.
P27 Operating expenses including Gross Margins of 22.3% (like UK major Mults).
P28 Marketing & Media: methods for generating business.
P30 Forward view for 2012.
P36 Cash Flows: Needs to be seen.
P37 P&L: Basis for calculating net margin of 2.2% before tax, good, given rate of growth and innovation.
P37 Balance Sheet: Basis for calculating ROCE 9.06%, Stockturn 8.4 times per annum, par for a wholesaling-like model.
P40 onwards Notes to the Accounts: Explaining the derivation of all figures and calculations.
P57-62 Legal proceedings: Details of on-going cases/issues.
P68 Segment analysis: More detail on geographical & category split.
P74 Quarterly Results 2012 (unaudited).
P78 Stock price performance graph: Which really says it all!!
NB. For explanation of financial jargon and basis of calculations, see KamWords, and NamCalc.
A summary of Amazon’s development is available in a free 38-slide set from Herriot Watt University at slideshare.net published in 2010 (see here). Key points include development of the business model, category and geographical evolution, beside a page of links and references. Googling ‘Amazon business model’ will supply any additional requirements for those who still need convincing….
